The Undercover Economist July 29, 2006

When my dad threw his copy of Tim Harford’s The Undercover Economist my way, I was skeptical. Normally when my dad recommends a book for me to read, mostly on “serious” subjects like economics, business or current events, it’s much to my liking, and the reverse is usually true for the books I throw his way. Yet this one was different. For one thing, he came upon it after reading Steven Levitt’s Freakonomics (and Levitt incidentally has a “soundbyte” on the book’s front cover). I didn’t much like Freakonomics, finding it overrated and simplistic, though my dad swears by it. It also didn’t help that Harford is a regular columnist for the Financial Times, a broadsheet that I have always found very difficult to read.

But it turns out that the book is actually quite good.

In some ways, The Undercover Economist is your standard “economics in the real world” reader. To simplify, the book is organized much like any standard economics textbook: Harford starts with the basic problem of scarcity and thereby demand and supply, goes on to discuss why markets work, explores why markets sometimes don’t, offers some thoughts on globalization and ends with a brief commentary on the importance of economics to human well being.

However, there is hardly anything “textbook” about his approach. If anything, the book’s strength lies in Harford’s ability to explain economic concepts using everyday examples – that is, without the math – while occasionally injecting humor along the way. Seasoned students of economics will be entertained by his anecdotes regarding the high price of coffee, the difficulty of finding low-rent apartments in the center of London and why it is nearly impossible to purchase a decent second-hand car from a used car salesman. At the same time, the book is accessible enough to readers not too familiar with the field such that they come away with a better understanding of such topics as scarcity power, externalities, asymmetric information and adverse selection (just to name a few) than even they may have thought possible.

This is not to say that the book is without its faults. Harford attempts to walk a fine line between writing a simplified economics manuscript and a witty commentary, and he does not always succeed. His anecdotes and insights are most effective when put to work explaining more practical phenomena than larger, more abstract concepts. To that end, the earlier chapters of the book, detailing day-to-day examples of economics in practice (so that’s why coffee companies able to charge exorbitant prices for their java!), are more compelling than the later ones (the chapter on globalization, in my opinion, was probably the weakest of the lot despite the very vivid anecdotes). And he does tend to belabor certain points unnecessarily. Taking the book for what it is, however, it is a very insightful bit of light and maybe not-so-light reading worth perusing.

Readers who enjoy this book will also probably enjoy Charles Wheelan’s much more straightforward Naked Economics, by far the simplest reader on the subject out there that isn’t a textbook. The book also complements John McMillan’s Reinventing the Bazaar, a much more serious book with a more limited focus on markets.